The challenges came as Sens. John Kerry, D-Mass., Lindsey Graham, R-S.C., and Joseph Lieberman, I-Conn., enter the final stretch of months of negotiations aimed at producing a broad compromise bill to cap greenhouse gas emissions, expand domestic oil and natural gas production, and boost nuclear power.

The trio is expected to circulate a draft of their proposal on Capitol Hill later this week before unveiling it next Monday.

The measure is expected to put a new emissions cap on electric power utilities beginning in 2012, with similar limits hitting manufacturers as early as 2016.

It remains unclear how the group ultimately might decide to limit emissions from the transportation sector, amid some opposition to a proposed carbon fee that would be imposed on gasoline and diesel fuels before they are delivered to fueling stations.

That fee could be linked to the cost of carbon pollution permits borne by utilities, with revenue possibly helping to fund research into more efficient vehicles.

The linked fee was originally advanced by refiners as a more transparent alternative to a complex House-passed plan that would make the industry pay for tailpipe emissions released when consumers burn their transportation fuels in cars and trucks.

‘Gas tax' talk

But in recent days, critics have said it is tantamount to a new “gas tax” that could hamper the nation's economic recovery.

Seven out of 10 Americans oppose higher gasoline taxes in order to limit emissions, according to the results of a survey released Tuesday and commissioned by American Solutions, the conservative group headed by former House Speaker Newt Gingrich.

Kerry tried to tamp down the gas tax talk and distinguished any transportation fuel plan from the unrelated, existing federal gasoline tax of 18.4 cents per gallon that helps pay for interstate highways and other roads.

“There is no gas tax, never was a gas tax, will not be a gas tax,” Kerry said.

“The gas tax is 18.4 cents today, and it'll be that when this bill is passed,” he added.

State control?

Another thorny issue for the climate change negotiators is the topic of offshore drilling — and whether to expand coastal states' control of nearby waters, while giving them a shot at lucrative royalty revenue.

Some coastal and Great Lakes Democrats had already outlined their opposition on mostly environmental grounds.

In a letter to colleagues, the trio said that if coastal states were given a share of offshore drilling revenues now funneled to federal coffers, the U.S. Treasury would be drained of “billions of dollars each year.”

Rust Belt concerns

Kerry, Graham and Lieberman are still working to appease the concerns of Rust Belt senators worried about how manufacturers will fare under new emissions caps — especially if foreign countries do not impose similar limits.

Although President Barack Obama last year criticized proposed trade sanctions as one solution, his top energy adviser, Carol Browner, on Tuesday signaled the administration's support for some trade protections.

“We certainly recognize that for certain manufacturing sectors … there are going to have to be mechanisms that recognize the fact that they compete in a global market,” she said.

Browner predicted that “a final bill will be very, very mindful of the needs of these particular sectors of the economy.”